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MNI (London)
--10 Countries Sign Proposal For Digital Revenue Tax
--France Hopes To Quash Dissent For Unanimity
By Tara Oakes
     BRUSSELS (MNI) - How do you solve a problem like Google? European Union
finance ministers on Saturday were divided on what big member states are
claiming is a landmark solution to the problem of getting digital giants to
cough up their tax dues.
     A total of 10 countries have now signed a letter proposing a tax on revenue
for big online companies, taking aim at Google, Apple, Facebook and the like who
rake in cash from European users but whose online business model is not subject
to common international tax laws.
     French Finance Minister Bruno Le Maire is keen to take credit for the
suggestion, initially put forward by France, Spain, Italy and Germany. The rate
is still up in the air but Austria, Bulgaria, Portugal, Romania, Slovenia and
Greece have co-signed the statement saying the time has come for the EU to move
"quickly" ahead on an "equalization tax".
     The push has worked: the European Commission are set to release a
communique before the upcoming Tallinn digital summit on September 29 outlining
what issues are at stake.
     The EU would then hope to put together a common position at December's
formal ECOFIN meeting ahead of the OECD meeting next year, in the hope of
presenting a united European front to spearhead digital taxation efforts on the
global stage.
     Draft legislation from the EU has been tentatively pegged for before the
end of 2018, MNI understands.
     DISSENT
     Acceptance of the turnover tax is far from universal. Rumblings of dissent
range from purely anti-tax to concerns that an EU approach fails to take into
account the need for a truly global solution.
     Even where they have set up physical entities, digital giants have done so
where they can take advantage of lower corporate tax rates in certain member
states. 
     Ireland enthusiastically welcomed Google, Apple and others with a 12.5%
corporation tax and according to sources were the most vocally opposed during
the ECOFIN informal meeting. Cyprus and Malta are also unenthusiastic.
     Other countries were concerned that a localised approach shouldn't be the
priority ahead of the OECD's global efforts such as BEPS (Base Erosion and
Profit Shifting) to tackle tax avoidance.
     MNI understands from a source in the room that British Chancellor Philip
Hammond launched a strong warning that a "short term solution is not favourable
to a long-term solution".
     "We shouldn't give the U.S. a pretext to pull out of the OECD process,"
Hammond reportedly said. The vast majority of digital giants to be hit by the
tax are American.
     Luxembourg also was hesitant to throw its weight behind the revenue
proposal ahead of OECD efforts. Finance Minister Pierre Gramegna complimented
the OECD's work on BEPS when entering the meeting, meriting a friendly shout of
"He's absolutely right!" from OECD Head Gurria who was passing by.
     Le Maire admitted on the sidelines of the meeting that it would be
"horribly complicated", adding that he would hold discussions on the suggestion
with Ireland himself.
     "I understand the difficulties of Ireland, who have founded their entire
economic model on a low corporate tax base," the French minister said. But, he
added, the meeting was "very constructive" and with "discussion, discussion,
discussion" he was hopeful of pan-EU agreement.
     "We won't let Europe be kicked around," he said.
     QUICK FIX
     Estonian Finance Minister Toomas Toniste said that "over half" of countries
saw the need to move fast on a "quick fix" solution, even if they didn't sign up
to the French-fronted idea.
     Poland, Hungary and "like-minded' countries approve of the proposal but are
more hesitant about the letter's backing of an EU Common Consolidated Corporate
Tax Base (CCCTB) as an ultimate goal, so have not signed.
     No member state is pretending this is a long-term solution. Estonia
themselves have proposed a "virtual permanent establishment" for web giants to
be taxed on in countries where they have a significant presence. 
     Estonia's Deputy Secretary General for Tax and Customs, Dmitri Jegorov,
said at the beginning of the informal ECOFIN session that risks remained in the
"quick fix", including the possibility of double taxation.
     But asked by MNI, Jegorov said he welcomed France's push and denied that
the French proposal derails their longer-term EU digitax ambitions.
     "It's like putting a more powerful engine in the same car," Jegorov said.
     Quick fixes are needed because tax proposals in the EU are a slow process.
     Currently, EU tax decisions require unanimity. But European Commission
President Jean-Claude Juncker said in his State of the Union address Wednesday
that he was in favour of switching to qualified majority voting. The change
would help stop tax ideas like the much-delayed Financial Transaction Tax (FTT)
from stagnating -- popular with those keen for the EU harness more funds, but
anathema for countries like Ireland who could they face having such proposals
forced upon them.
     Without unanimity under the present system, Europe could face a patchwork
of national solutions -- rendering the Old Continent a "horrible place to do
digital business", Jegorov said.
--MNI Brussels Bureau; +44 203-865-3851; email: tara.oakes@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: M$E$$$,MX$$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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